20 things you need to know about VAT – part 1

One for each percentage point of the VAT rate. This is the first of a number of posts that will go through all 20 topics. Let’s get started.

1. Do you know the registration limits?

This is currently £73,000. When the value of your supplies gets to this limit you have to tell HMRC. You can find full details on VAT registration limits for 2011 and earlier years. There’s a good chance that it will change later this year. I’ll put the new limits on this site after they are announced.

Remember that you can register for VAT before you reach the registration limit. It might be worth it.

2. Telling HMRC you have gone over the registration limit.

You have 30 days from of the end of the month you went over the registration limit to tell HMRC. So, if your turnover in the 12 months to 29 February is over the registration limit you have to fill in the forms and send them to HMRC by 30 March.

You will be registered from 1 April.

3. What rate VAT do you need to use?

Do you know what rate of VAT to charge on what you sell? Are you sure? Really, really sure?

If you are selling goods to someone in the EU the VAT rate you apply will differ depending on whether your customer is a business or a private individual. If you sell services then the place where your customer belongs and whether they are a business will be important factors as to the rate of VAT you charge.

It’s important to get this right. Make a mistake and you may have to pay VAT to HMRC you are unable to get from your customer, and on top of that interest and penalties.

Another batch of things you need to know will appear in the next few days.

Got a question? Ask it using the comments system.

 

Related posts:

1. 17 and a half things you need to know about VAT – Part 1
2. Registration limits – updated for 2011
3. VAT Registration limits – updated for 2009

New notices published by HMRC

HMRC has recently published the following new notices:

• Notice 48: Extra Statutory Concessions dated February 2012 to replace the January 2011 edition.

This new version of the notice is expected to contain only those ESCs that remain following the withdrawal of a number since the last edition was published.

• Notice 701/32: Burial, cremation and the commemoration of the dead dated January 2012 to replace the January 2006 edition.

HMRC says that this new version of the notice has been generally updated and rewritten to improve readability.

• Notice 701/21A: Investment Gold Coins dated February 2012 to replace the February 2011 edition.

HMRC says that this new edition of the notice:

• explains that an investment gold coin is exempt from Value Added Tax (VAT) and explains which coins can be considered as investment gold coins (see section 2), and
• provides revised lists of investment gold coins whose supply is exempt from VAT (in section 3). Readers are advised that, because there are several changes from previous lists, they should refer directly to the lists for qualifying coins.

 

Related posts:

1. HMRC publish updated version of notices
2. VAT Notes 4 issued by HMRC
3. VAT Tribunals – reform legislation published

Are you ready for doing your VAT return online?

From 1 April 2012 all businesses that currently do their VAT return on paper are going to have to start doing them online. There are some exceptions to this rule which will allow a few to continue to do them on paper – the exceptions allowed will be few and far between.

If you are still doing your VAT returns on paper you need to look at moving to doing them online. Online returns are reasonably straightforward. You can save the return once started until you are ready to submit it. Once submitted you get a receipt and an opportunity to download a copy of the return for your records – do this, and keep the receipt to show that you have done the return.

The hard part about getting set up to do your returns online is getting registerd for it, unless you have already registered with the Government Gateway to access HMRC’s services online, you will have to do so and that means waiting for them to send you a PIN so you can gain full access to the service. It’s important that you register early as it takes seven days or so for the PIN to arrive. It’s only valid for 28 days so you need to use it as soon as you can after it arrives.

If your bookkeeper does your VAT return for you, they can also submit it online for you now. You have to authorise your bookkeeper, or other agent, to do this. A bit of a palaver, I know, although it is one that could save you time in the long run.

Get on with it. You’ll have to use the online system for VAT returns beginning on or after 1 April 2012.

You can find more information on HMRC’s website that will guide you through the process.

 

Related posts:

1. Still doing your VAT Return on paper?
2. HMRC’s online service will be offline
3. HMRC scrap Flat Rate Scheme ready reckoner

The perils of failing to ask for a VAT invoice

There was a company that was making a good profit by sourcing desirable consumer items like tablet computers, smartphones, etc. that were in short supply. It was unable to get these products by buying from the suppliers because there was such high demand for them that supplies were limited. Most retailers were only allowing customers to buy two of these products each.

The company was sending its staff to the retailers to buy the items two at a time. Each item generally cost several hundred pounds. Buying two was certainly more than £250.00. What’s so important about £250.00? I’ll tell you in a moment. So, the company’s staff returned with their purchases and the company was able to meet the demands of overseas customers who were unable, at that time, able to buy the products in their home countries.

Are you still with me?

The sale of the items the company had bought was outside the scope of UK VAT because the goods were exported. The company had full evidence of the export so the VAT man was happy that there was no VAT to account for on the sale.

Remember that £250.00 I mentioned earlier? Well, there’s a VAT rule that says that where the amount paid is no more than £250.00 including VAT the retailer can issue a less detailed VAT invoice. Less detailed VAT invoices contain significantly less information than a full VAT invoice. In particular the name and address of the customer is one item that is missing from them. The VAT man noticed that the company had lots of these less detailed VAT invoices where the value of the supply was over the £250.00 limit. The VAT man has assessed the company for the VAT it had claimed against these invoices.

So the moral of this tale? Remember to get full VAT invoices for purchases where you are paying more than £250.00 if you want to be able to recover the VAT on your next VAT return.

Got a view on this? Leave a comment below.

Need help with a VAT issue? Give me a call on 01293 734545.

 

Related posts:

1. Can you reclaim the VAT on a new car?
2. Good News for users of the Flat Rate Scheme
3. HMRC scrap Flat Rate Scheme ready reckoner

HMRC targeting businesses that trade above the VAT registration limit

HMRC has published a press release in which it has announced a compaign to target businesses that have turnover above the registration limit which have failed to register for VAT. HMRC will use information to which it already has access, e.g. direct tax data, to assist in its search for such businesses, as well as other means.

HMRC intends to invite such businesses to voluntarily register during the campaign and is likely to offer a reduced penalty over that usually applied for late registration. For late registration the penalty is a percentage of the amount of VAT due from the date from which registration started to the date on which HMRC was notified. The longer the delay the higher the penalty. Although the penalty might be reduced there is no guarantee, and it is still likely to be on a sliding scale.

If you are trading above the registration limit and have yet to register for VAT, you need to take action sooner rather than later because the longer you wait the bigger the penalty you will have to pay.

For more information on registration limits visit my VAT Registration Limits page.

If you need help deciding whether you must register for VAT, ask your accountant or find a local VAT specialist to advise you.

Got any views on this? Leave a comment below.

 

Related posts:

1. A salutary tale for the new business…
2. VAT Registration limits – updated for 2009
3. Five Things You Need to Know About VAT Accounting

Evading VAT on cars brought into the UK

It seems that there are some people who are avoiding paying VAT on vehicles they bring into the UK. The issue only affects vehicles that are brought into the UK permanently. Vehicles that are in the UK temporarily have no need to be registered with the DVLA and any VAT due paid to HMRC.

Under the current system it is possible for vehicles to be registered with the DVLA without paying any VAT due to HMRC. This is to be addressed in a joint initiative between HMRC and the DVLA which will result in a new online system being set up.

HMRC and the DVLA have indicated they will be issuing a consultation document on this by the end of May 2011. So if you have any views on the matter respond to the consultation.

The proposal is to have the online system in place by early 2013. The new system is expected to reduce the number of vehicles that remain permanently in the UK without registering with the DVLA or paying VAT.

Have a view on this? Leave a comment below.

 

No related posts.

Be careful where you get your VAT number

This may sound a little odd. It seems that there are ‘businesses’ out there that are offering to get a VAT number in return for a payment: taken in advance. According to the note I received from the European Commission on this the proposals apparently appear to be official EU documents.

Of course, in the UK you can apply for a VAT number to H M Revenue & Customs for free. If you need to know whether or when you have to register in the UK you can find more information on the VAT Registration Limits page on this website.

For information on other VAT registration in other EU countries the European Commission provides information on its website.

If you have any views on this please leave a comment.

 

Related posts:

1. HMRC targeting businesses that trade above the VAT registration limit

HMRC pour cold water on hot take-away food?

I wrote about this in my article Good news for hot take-away food suppliers? a few days ago after the release of the European Court of Justice’s (ECJ) decision in Manfred Bog and others. HMRC has now published a Revenue & Customs Brief which almost makes clear HMRC’s position in relation to the impact of the decision. The case was referred to the ECJ by the German tax authorities. In Germany there is a reduced rate of VAT for foodstuffs.

The question considered by the ECJ was whether the supply by the vendors from places such as mobile snack bars was a supply of goods or a supply of services. In press articles HMRC was quoted as saying they treated all supplies of food as a supply of goods. There is no mention of that in the Revenue & Customs Brief. The brief is a lot of waffle with very little substance, although it does make clear that HMRC will entertain no claims for zero-rating.

The question has to be whether UK legislation is in line with the EU legislation. Is the supply of catering services, e.g. a restaurant, a supply of foodstuffs and thus a supply of goods? Or is it a supply of services?

One thing is clear, to get HMRC to change its stance on this will require someone to take the matter to Court. I think HMRC might be wrong about the application of the zero-rate to hot take-away food being impossible – would it be an extension of the zero-rate? Or just a redefining of hot take-away food so that it falls within the zero-rating?

Have a view on this? Leave a comment: let’s start a discussion.

 

Related posts:

1. Good news for hot take-away food suppliers?
2. New notices published by HMRC
3. HMRC scrap Flat Rate Scheme ready reckoner

HMRC has withdrawn the Flat Rate Scheme ready reckoner that I referred to in The VAT Flat Rate Scheme for Small Businesses – a brief description.

This is sad news as it means that it is currently harder to work out whether using the Flat Rate Scheme is harder. You will have to do all the calculations yourself.

It is possible that a new version will be made available on another Government website. As soon as I become aware of this happening I’ll let you know.

 

Related posts:

1. New Flat Rate Scheme percentages from 4 January 2011
2. Good News for users of the Flat Rate Scheme
3. Flat Rate Scheme percentages for 2010

I have added the latest table, as published in the Budget 2011 papers, to the site.

Fuel Scale Charge from 1 May 2011

 

Related posts:

1. Fuel Scale Charges information from 4 January 2011
2. Fuel scale charge for periods starting before May 2009
3. Fuel Scale charges from 1 May 2010